RBI imposes ₹5.39 cr fine on Paytm Payments Bank; stock falls

The Reserve Bank of India (RBI) has imposed ₹5.39 crore fine on Vijay Shekhar Sharma-led Paytm Payments Bank Limited (PPBL) for non-compliance with some of its provisions. Amid the news, Paytm stock dipped 1.47% to ₹951.80 in the opening trade today after a gap up opening at ₹984.90 on the BSE. At the current share price of ₹944, the m-cap of Paytm stands at ₹59,887.13 crore.

The RBI says Paytm Payments Bank, a subsidiary of Paytm parent One97 Communications, violated the provisions of the 'RBI (KYC) Directions, 2016’, ‘RBI Guidelines for Licensing of Payments Banks’, ‘cyber security framework in banks’, and ‘securing mobile banking applications including UPI ecosystem’.

Paytm, while informing the stock exchanges, says the action is not intended to pronounce upon the "validity of any transaction or agreement entered into by PPBL with any of its customers". "Our associate PPBL has the highest regards for the extant RBI regulatory framework and is taking steps to ensure complete adherence to the supervisory instructions issued in this regard. PPBL is also currently in the process of adhering to other instructions of RBI," says Paytm.

The central bank, in its rationale behind the fine, says a comprehensive system audit of the bank, including the examination of the scrutiny report, system audit report, and related correspondence, showed "non-compliance" with the rules by Paytm. It says Paytm Payments Bank failed to identify the beneficial owner in respect of entities onboarded by it for providing payout services. It also did not monitor payout transactions and carry out risk profiling of entities availing payout services. The bank also "breached the regulatory ceiling" of end-of-the-day balance in certain customer advance accounts availing payout services.

Other violations pointed out by the RBI include a cyber security incident with delay, failure to implement device binding control measure related to ‘SMS delivery receipt check’, and failure of V-CIP infrastructure to prevent connections from IP addresses outside India.

The central bank even issued a notice to the bank, asking that a penalty should not be imposed on it for failure to comply with the said directions. After considering the bank’s submissions, the RBI stated the charge of "non-compliance" of its directions was substantiated and warranted a monetary penalty.

Besides, in a separate order, the RBI also cancelled the certificate of registration of Chennai-based housing finance company, Ind Bank Housing Ltd. The housing finance company was issued licence on August 16, 2001, and its licence was cancelled on September 21, 2023.

The RBI also says that 14 non-banking financial companies (NBFC) have surrendered the certificate of registration granted to them. These are Shivam Hire Purchase & Finvest Pvt Ltd, Shree Shanti Trades Pvt. Ltd., Adroit Commercial Pvt Ltd, Sun Finlease (Gujarat) Limited, Chitrakoot Motor Finance Limited, VIP Finstock Private Limited, Dhruvtara Finance Services Limited, Saija Finance Private Limited, Micrograam Marketplace Private Limited, TMF Business Services Limited (formerly known as Tata Motors Finance Limited). All of them have exited the NBFC business, says the RBI.

Four others that cease to be a "legal entity" due to amalgamation or merger or dissolution or voluntary strike-off are BDJ Chemicals, Alkan Fiscal Services, Eeshwar Fiscal Services, and SNK Investments Private Ltd.